The Collapse of the Thai Bhat essays

The Collapse of the Thai Bhat essays One of the main similarities between the collapse of the Thai Baht and the collapse of the Korean Won was that they both occurred in the year 1997. This period was a time of great economic crisis, not only for the two countries but also for most of Asia itself. Thailand and Korea emerged as examples of Asias great economies in the mid 1980s and 1990s. But the main reason for the collapse of the two countries currencies was the fact that there was heavy borrowing from banks and foreign investors, which put these Asian companies in debt. For example, from 1990 to 1996 in Thailand, there was an investment boom in commercial and residential property, industrial assets and infrastructure. This led to a great demand in property and this created the real estate in Bangkok to soar. There were many apartments and office buildings going up all over the city. Since the property was so expensive, many property developers had to borrow money from banks. But as long as the value of property rose, the banks were happy to hand out loans to the property companies. Nevertheless, in 1997 the property boom had rocketed so far out of proportion, there was a great excess in both residential and commercial property. This left Bangkok with 365,000 apartment units unoccupied. The once great demand in property had been substituted by an excess supply. Many of Thailands organizations were still purchasing capital equipment from the US, Japan and Europe from loans. This put Thailand at a deficit of 8.1 percent of its gross domestic product. After Somprasong Land Company could not pay an interest on an $80 billion loan, thing started to fall apart. The Thai stock market declined 45 percent from its high in 1996, primarily on concerns that several property companies might be forced into bankruptcy. Many financial institutions, like Financial One, also fell into bankruptcy after being unable to pay back its creditors. ...